SA fund managers are increasing their exposure to banks and apparel retail, positioning themselves to benefit from improving domestic conditions.
According to Bank of America’s SA fund manager survey for July 2025, banks are the most overweight sector, followed by clothing retail.
The rotation comes as managers forecast 12-month total returns of 16% for equities, ahead of returns for bonds and cash. The two preferred equity sectors are seen as sensitive to interest rate changes and local consumption, areas expected to stabilise if inflation remains benign and policy remains supportive.
The renewed appetite for retail stocks comes amid mixed performances across major apparel companies. According to Iress data Pepkor, the largest apparel retailer by market capitalisation, has gained almost 37% on a year-rolling basis. Mr Price, despite a year-to-date slump of more than 28%, remains marginally positive over the same period. TFG is down 24% so far this year, but has picked up a little in the past month. Truworths and Woolworths have struggled for much of the year.
Meanwhile, bank stocks have shown positive momentum. Capitec, now worth more than R400bn, has gained 11% year to date and 29% over the past year. While Standard Bank is only up 4% this year, it has gained 11% in a year. Absa, with a market cap of R158bn, is down 7% in 2025 and FirstRand is flat.
Markets have rallied, the long-standing ‘SA discount’ has narrowed, and policy momentum is driving a new level of optimism.
— Robert J van Eyden
Scope Markets SA CEO
The improved investor sentiment follows the formation of the government of national unity in 2024 and growing confidence in structural reforms. According to Scope Markets SA, this has contributed to a narrowing of the long-standing “SA discount” and a recovery in local markets.
“Markets have rallied, the long-standing ‘SA discount’ has narrowed, and policy momentum is driving a new level of optimism. Structural reforms aimed at restoring 3% GDP growth are gaining traction, and both domestic and international investors are beginning to reprice the SA opportunity,” Scope Markets SA CEO Robert J van Eyden said.
“This renewed confidence is visible not only in equity performance but also in trade volumes across bonds and listed instruments. SA remains one of the few global markets where price formation still occurs primarily on-book, on-exchange; an essential feature of a healthy, transparent market ecosystem.
“The robustness of this infrastructure, supported by a deep institutional backbone, gives retail traders a rare level of access to clean price discovery and liquidity.”
According to Statista, SA’s apparel market is valued at $6bn (R106bn), led by women’s apparel, and is expected to grow steadily at 5.4% annually through to 2029.
With an average spend of $93.11 and 24 pieces per person, Statista said the market is largely driven by non-luxury items, which make up 97% of sales. While global giants such as the US dominate in revenue, SA stands out for its rising demand for sustainable and ethically produced clothing.
Bank of America also reports a change in institutional positioning, with increased exposure to domestic equities, gold and life insurance, and reduced allocations to healthcare, telecom and offshore assets. The survey also shows that cash holdings have fallen to a record low of 4.3%, as managers rotate into risk assets in anticipation of improved market conditions.
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